Millions of young people are left struggling to pay bills and unable to get a foot onto the housing ladder, the report says.

Of the average graduate's salary, which stands at £27,155, £4,608,40 now disappears in income tax, £2,432,21 in national insurance contributions, £3,043,15 in indirect taxes such as VAT, £1,493.53 in pension contributions, £1,093.95 in compulsory student loan repayments, and £618.50 in council tax.

That leaves them with just £13,862.26 to spend each year.

Reform director Andrew Haldenby said the Government was out of step with an increasing global consensus

that young people had to be protected from the rising costs of looking after ageing populations.

Strict public spending curbs, tax cuts and more private contributions to healthcare and pensions were needed to allow resources to be redirected, he said.

"The Government fails to face the facts: high taxation and high public spending impose massive burdens upon both young people and the economy.

"The rest of the world has outlined a better approach."

The report said the changes in this year's Budget - including the abolition of the ten per cent starting rate of income tax - would reduce the incomes of young people earning up to £18,500.

The report warned that the squeeze on young people's incomes was keeping young people out of the housing market, with an increasing number having to stay living at home well into adulthood.

The number of men aged between 25 and 29 living at home increased from 23 per cent to 29 per cent between 2005 and 2006, the report says.

More and more young people are deterred from getting onto the housing ladder by rising stamp duty costs, it concludes.

The Government has repeatedly failed to lift the threshold for the levy in line with house prices. Across Britain, the average first time buyer now faces a stamp duty bill of around £1,500 and in London, they pay £7,500.

Since 1997, overall student debt has risen by 176 per cent, from £1.2 billion to £3.2 billion. This year's new students face an average debt of £14,841 when they leave university.

The number of people in the 18 to 29 age group being declared bankrupt has increased more than any other age group over the last three years.

In 2003-4, 5,255 18- to 29-year-olds were declared bankrupt, but in 2005-6 the number had increased to 10,297, a 95 per cent increase.

Among the recommendations of the report are the introduction of a 'growth rule' to limit public spending to 35 per cent of national income within two Parliaments, co-payments for healthcare, more parental choice in education and tax cuts such as raising the income tax threshold to £15,000.

But while politicians had played their part in hammering young people, "perhaps the ultimate responsibility lies with the IPOD generation themselves", it added.

"Youth apathy has afforded politicians the chance to be complacent on these matters, allowing them to pamper the baby boomers who make up so much of the voting electorate.

"In the end, if young people want to see lower debts, fairer taxes, better education and greater opportunity, they should rise from their political slumber and make for the ballot boxes."

Nick Bosanquet, consultant director of Reform and professor of health policy at Imperial College London, said protecting young people was "a defining modern political issue".

"The IPOD generation have been reduced to galley slaves in the public spending empire of the baby boomers. The Government is in the process of mortgaging the future of a generation," he said.

A Treasury spokesman rejected the criticisms.

He said: "Since 1997, reforms of the tax and benefits system carried out by the Government - including setting the lowest basic rate of income tax for 75 years - have improved incentives for young people to progress in work.

"The fact of the matter is that the number of 16-24 year olds who are in education, training or employment has risen by nearly 700,000 since 1997 and the New Deal for young people has helped over 1.2 million 18-24 year olds into around three quarters of a million jobs since 1998."

But acting Liberal Democrat leader Vince Cable said: "This report is a damning indictment of Labour's treatment of young graduates.

"A decade under Labour has left many young people facing crippling student debt, high council tax bills and, following the abolition of the 10p rate, higher levels of income tax.

"Gordon Brown's obsessive tinkering with the tax system and introduction of top-up fees mean that graduates on modest salaries now face an unacceptably high tax burden.

"The tax system should be radically reformed by abolishing the unfair council tax and cutting income tax for people on low and average salaries to ensure that work pays."